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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
[X]Annual Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act
of 1934 for the fiscal year ended February 3, 2001 ("Fiscal 2000").
[ ]Transition Report Pursuant To Section 13 or 15(d) of The Securities Exchange
Act of 1934 for the transition period from to .
[Commission file number 0-23874]
JOS. A. BANK CLOTHIERS, INC.
----------------------------
(Exact name of registrant as specified in its character)
Delaware 36-3189198
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(State of Incorporation) (I.R.S.Employer Identification No.)
500 Hanover Pike, Hampstead, MD 21074
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(Address of principal executive offices) (zip code)
(410) 239-2700
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(Registrant's telephone number, including area code)
Securities registered pursuant to Securities registered pursuant to
Section 12(g) of the Act: Section 12(b) of the Act:
Title of each class None
------------------- ----
Common Stock (the "Common Stock") par value $.01 per share
Rights to purchase units of Series A Preferred Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III for this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant, based upon the closing price of shares of Common Stock on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System at April 19, 2001 was approximately $37,937,344.
The number of shares of Common Stock, par value $0.01 per share, outstanding on
April 19, 2001 was 5,955,627.
DOCUMENTS INCORPORATED BY REFERENCE:
The Company will disclose the information required under Part III (items 10-13)
either by (a) incorporating the information by reference from the Company's
definitive proxy statement if filed by June 4, 2001 (the first business day
following 120 days from the close of its fiscal year ending February 3, 2001) or
(b) filing an amendment to this Form 10-K which contains the required
information by June 4, 2001 (the first business day following 120 days from the
close of the Company's fiscal year ending February 3, 2001).
Index to the exhibits appears on Pages 13 and 14.
PART I
Item 1. BUSINESS
General
Jos. A. Bank Clothiers, Inc., a Delaware corporation (the "Company" or
"Jos. A. Bank"), established in 1905, is a retailer and cataloger of men's
tailored and casual clothing and accessories. The Company sells substantially
all of its products exclusively under the Jos. A. Bank label through its 117
Company-operated retail stores (including seven outlet stores and ten franchise
stores), located throughout the Northeast, Midwest, South and Mid-Atlantic
regions of the U.S., as well as through the Company's nationwide catalog and
Internet (www.josbank.com) operations.
The Company's products are targeted at the male career professional,
and its marketing emphasizes the Jos. A. Bank line of quality tailored and
casual clothing and accessories, which is offered at price points typically
below those of its principal competitors for items of comparable quality. The
Company believes that it is able to achieve this pricing advantage for its men's
suits, sport coats and pants primarily by its design capability and its sourcing
leverage. In April, 1998, the Company completed the disposition of its remaining
manufacturing operations and now sources all of its products through third party
vendors.
Strategy
The Company's strategy is to further enhance its competitive position
in men's proprietary label, updated apparel, and to capitalize on the strength
of the Jos. A. Bank name and reputation by offering its customers multiple
convenient outlets to purchase product, including its 117 retail stores,
Internet site and catalog.
Multi-Channel Retailing. The Company's strategy is to operate
its three channels of selling as an integrated business and to provide
the same personalized service to its customers regardless of whether
merchandise is purchased through its stores, the Internet or catalog.
The Company believes the synergy between its stores, its Internet site
and its catalog offers an important convenience to its customers and a
competitive advantage to the Company. The Company believes it has
significant opportunity to leverage the three channels of selling by
promoting each channel together to create awareness of the brand. For
example, the Company promotes its Internet site in its stores, catalog
and media advertising without incurring substantial costs to create the
promotions. Conversely, the Internet site provides store location
listings and can be used as a promotional source for the stores and
catalog. The Company also uses its catalog to communicate the Jos. A.
Bank image, to provide customers with fashion guidance in coordinating
outfits and to generate store and Internet traffic.
Store Growth. The Company believes that it has substantial
opportunity to increase its store base by adding stores in its existing
markets and by entering new markets. The Company opened eight new
full-line stores and two outlet stores in fiscal 2000 and recently
completed the first year of its plan to open approximately 75-100 new
stores through fiscal 2003. Substantially all of the stores to be
opened in the next several years will be placed in existing markets
which allows the Company to leverage its existing advertising,
management, distribution and sourcing infrastructure. However, certain
new stores may be opened in new markets such as California, Washington,
Arizona, etc., as opportunities warrant.
Internet. The Company's success as a cataloger facilitated the
development of on-line selling capabilities in August, 1998, providing
a worldwide purchasing audience. The Internet accounted for
approximately 2% of sales in fiscal 2000, increasing by 188% over the
prior year and the Company expects its Internet sales volume to
continue to grow at a significant rate.
Sales Channels
Stores. The Company has focused on three key factors that it
believes will contribute to even greater success in its stores. The
Company has targeted specialty retail centers with certain co-tenancy for
new store locations, has developed and is implementing a new store
prototype to attract customers and has shifted from heavy dependence on
sales of suits to its successful Corporate Casual and Sportswear.
At April 19, 2001, the Company operated 100 full-line retail
stores, seven outlet and ten franchise locations in a total of 29 states
and the District of Columbia. The following table sets forth the region
and market of the stores that were open at such date.
1
JOS. A. BANK STORES
Total # Total #
State Of Stores State Of Stores
- ----- --------- ----- ---------
Alabama 2(a) Mississippi 1(a)
Colorado 2 Missouri 1
Connecticut 4 New Jersey 8
Delaware 1 New York 9
Florida 4 North Carolina 6(a)
Georgia 9(a)(b) Ohio 4
Illinois 7(a) Pennsylvania 5(b)
Indiana 1 Rhode Island 1
Kansas 1 South Carolina 1
Kentucky 1 Tennessee 3(a)
Louisiana 3(a) Texas 11
Maryland 9(b) Virginia 10(b)
Massachusetts 3 Washington, D.C. 1
Michigan 4 Wisconsin 1
Minnesota 2 Utah 2
Total 117
(a) Indicates one or more franchise stores
(b) Indicates one or more outlet stores
The Company expects its 75-100 projected new stores to provide an
additional $90 million in annual sales by the final year (fiscal 2003) of its
store growth plan. To increase the assurance that the future new stores would be
successful, the Company hired a firm that specializes in real estate selection
to analyze the performance of all of its existing store sites. The real estate
specialist identified a key factor that appears to point to the success of a
Jos. A. Bank store -- that the Company's stores located in high-end, specialty
retail centers with the proper co-tenancy significantly outperform stores that
are in strip centers or are free-standing. These specialty centers include
current store sites such as Reston, VA, Annapolis, MD and East Cobb, GA.
The Company has identified approximately 200 sites that fit the profile
of the specialty retail centers and expects many more to be developed over the
next three years. Jos. A. Bank has identified the first 100 targeted locations
and is aggressively pursuing them. The Company expects to open between 75-100
stores through 2003, including the 8 stores opened in fiscal 2000 and up to 30
stores in fiscal 2001.
The Company's new store prototype was designed in the second half of
2000 and was introduced in March 2001 at its first new store of the fiscal year
in Charlottesville, VA. The design emphasizes an open shopping experience that
coordinates its successful Corporate Casual and Sportswear with its other
products. The store design is based on the use of wooden fixtures with glass
shelving, numerous tables to feature fashion merchandise, carpet and abundant
accent lighting and is intended to promote a pleasant and comfortable shopping
environment. In the stores that have been opened in the last four years,
approximately 80% of a store's space is dedicated to selling activities, with
the remainder allocated to stockroom, tailoring and other support areas. This
compares favorably to other Company stores where approximately 65% is dedicated
to selling activities. The full-line stores averaged 8,200 square feet at the
beginning of fiscal 1997 and averaged 6,500 square feet at the end of fiscal
2000. The Company expects that future stores will vary in size from
approximately 4,000 to 6,000 square feet depending on the market.
The stores are designed to utilize regional overflow tailor shops which
allows the use of smaller tailor shops within each store. Each full line store
has a tailor shop which provides a range of tailoring services. The Company
guarantees all the tailoring work. Operating National Tailoring Services (NTS),
the company-owned regional tailor shops, has allowed the Company to reduce the
number of tailors in the stores by sending all overflow work to NTS. These
overflow shops experience higher productivity as the tailors are not interrupted
by store personnel during the course of the day. In every store, the store
manager and certain additional staff have been trained to fit tailored clothing
for alterations.
The Company has ten franchise locations. Generally, a franchise
agreement between the Company and the franchisee provides for a ten-year term
with an option, exercisable by the franchisee under certain circumstances, to
extend the term for an additional ten-year period. Franchisees pay the Company
an initial fixed franchise fee and then a
2
percentage of sales. To assure that customers at franchise locations receive the
same personalized service offered at Company operated stores, the Company
typically requires certain franchisee employees to attend a Company sponsored
training program. In addition, franchisees are required to maintain and protect
the Company's reputation for high quality, classic clothing and customer
service. Franchisees purchase substantially all merchandise offered for sale in
their stores from the Company at an amount above cost.
The Company has seven outlet stores which are used to liquidate excess
merchandise and offer certain first quality products at a reduced price. Because
of the classic character of the Company's merchandise and aggressive store
clearance promotions, historically, the Company has not had significant
quantities of merchandise to sell through its outlet stores.
Catalog
The Company's catalogs offer potential and existing customers
convenience in ordering the Company's merchandise. In fiscal 2000 and 1999, the
Company distributed approximately 8.0 and 7.8 million catalogs, respectively,
excluding catalogs sent to stores for display and general distribution. In
fiscal 2000 and 1999, catalog sales represented approximately 10% and 12% of net
sales, respectively. The Company divides the year into two merchandise seasons,
Spring and Fall, and mails its catalog to active customers as often as every
four weeks.
Catalogs offer potential and existing customers an easy way to order
the full range of Jos. A. Bank products. Catalogs are important tools in
communicating our high-quality image, providing customers with guidance in
coordinating outfits, generating store traffic and providing useful market data
on customers. Customers increasingly are becoming more comfortable purchasing
traditional business attire through the catalog.
To make catalog shopping as convenient as possible, the Company
maintains a toll-free telephone number accessible 24 hours a day, seven days a
week. The Company utilizes on-line computer terminals to enter customer orders
and to retrieve information about merchandise and its availability. Catalog
sales associates are generally able to help select merchandise and can provide
detailed information regarding size, color, fit and other merchandise features.
In most cases, sample merchandise is available for catalog sales associates to
view, thereby allowing them to better assist customers. Clothing purchased from
the catalog may be returned to any Company store or to the Company by mail.
To process catalog orders, sales associates enter orders on-line into a
computerized catalog order entry system which automatically updates all files,
including the Company's customer mailing list, and permits the Company to
measure the response to individual merchandise and catalog mailings. Sales and
inventory information is available to the Company's buyers the next day.
Computer processing of orders is performed by the warehouse management system
which permits efficient picking of inventory from the warehouse. The Company's
order entry and fulfillment systems permit the shipment of most orders the
following day. Orders are shipped primarily by second day delivery or, if
requested, by expedited delivery services, such as UPS priority. The Company
replaced its Catalog system in May 1999 which facilitated easier order entry and
provides greater customer data, as well as being Y2K compliant.
Internet
The Company is committed to growing its Internet sales which increased
188% in fiscal 2000. The Company has established over 500 affiliate arrangements
which drive a significant amount of traffic to its internet site. In 2001, the
Company expects to continue pursuing similar arrangements. The Company invested
approximately $1 million in 2000 to implement a new Internet site that has many
customer-friendly features such as increased speed, real-time inventory status,
order confirmation and product search capabilities, among others. The new site
also enables the Company to be more responsive to trends to increase sales. The
new site went "live" in August 2000 and replaced a site that had been hosted by
a third party.
The processing of orders for the Internet uses the same system used to
fill catalog orders. As such, the Company has an existing infrastructure to
service its internet customers efficiently and quickly.
Merchandising
The Company believes it fills a niche of providing classic,
professional men's clothing with impeccable quality at a good price. The
Company's merchandising strategy focuses on achieving an updated classic look
with extreme attention to detail in quality materials and workmanship. The
Company offers a distinctive collection of clothing and accessories necessary to
dress the career man from head to toe, business dress and business casual, all
sold under the Jos.
3
A. Bank label. Its product offering includes suits, tuxedos, shirts, vests,
ties, sport coats, pants, sportswear, overcoats, sweaters, belts and braces,
socks and underwear. The Company also sells branded shoes from Cole Haan,
Johnston & Murphy and Allen-Edmonds.
The Company believes its merchandise offering is well positioned to
meet the changing trends of dress for its target customer. As the corporate work
environment has trended to casual wear, the Company's product offering has been
modified to meet the needs of the Jos. A. Bank customer. In 2000, casual wear
(which includes sport coats, slacks and sportswear) accounted for 44% for the
Company's sales, while suits represented less than 30% of sales.
The Company made several key additions and changes to its product line
in 2000. It introduced the TRIO/(R)/ collection as one of its solutions to
Corporate Casual. The TRIO/(R)/ includes a jacket with coordinating pants and a
second set of pants in a coordinating pattern. Therefore, the outfit can be worn
as a suit or in a casual setting. The Company also offers its customers its
Business Express line, a concept for purchasing suits that allows customers to
customize their wardrobe by selecting separate, but perfectly matched, jackets
and pants from one of three coat styles, plain front or pleated pants, and
numerous updated fabric choices including Super 100 wool and natural stretch
wool. The Business Express line allows a customer to buy a suit with minimal
alteration and will fit their unique body size, similar to a custom-made suit.
Jos. A. Bank is one of the few retailers in the country that has successfully
developed this concept which the Company believes is a competitive advantage.
During fiscal 2000, the Company upgraded its Business Express line by using Loro
Piana Super 100s wool and adding other standard features. The Company also
expanded its casual offering and believes it has one of the most extensive
selections of sportcoats and dress pants in the industry. Its David Leadbetter
Golf Apparel was expanded as was the offering of categories such as sportshirts,
sweaters, casual trousers and shoes.
Design and Purchasing
The Jos. A. Bank merchandise is designed through the coordinated
efforts of the Company's merchandising, buying and planning staffs working in
conjunction with finished goods suppliers and contract manufacturers.
Substantially all products are made to the Company's rigorous specifications,
thus ensuring consistent fit and feel for the customer. The merchandising buying
staff oversees the development of each product in terms of style, color and
fabrication. Because the Company's designs are focused on updated classic
clothing, the Company experiences much less fashion risk than other retailers.
The process of creating a new garment begins approximately nine months before
the product's expected in-stock date.
The Company believes that it gains a distinct advantage over many of
its competitors in terms of quality and price by effectively designing products,
sourcing piece goods and then having merchandise manufactured to its own
specifications by contract manufacturers, either domestically or abroad. The
Company buys its shirts from leading U.S. and overseas shirt manufacturers who
also supply shirts to many of the Company's competitors. All clothing
manufactured for the Company by contract manufacturers must conform to the
Company's rigorous specifications with respect to standardized sizing and
quality.
The Company's planning staff is responsible for providing each channel
of business with the correct amount of products at all times.
The Company transacts business on an order-by-order basis and does not
maintain any long-term or exclusive contracts, commitments or arrangements to
purchase from any piece goods vendor or contract manufacturer. During fiscal
2000, three vendors accounted for over 88% of the piece goods purchased by the
Company. The Company does business with all of its vendors in U.S. currency and
has not experienced any material difficulties as a result of any foreign
political, economic or social instabilities. The Company believes that it has
good relationships with its piece goods vendors, finished goods suppliers and
contract manufacturers and that there will be adequate sources to produce a
sufficient supply of quality goods in a timely manner and on satisfactory
economic terms.
Marketing, Advertising and Promotion
Strategy. The Company has historically used mass media print and radio
and direct mail marketing, advertising and promoting activities in support of
its store and catalog operations. Core to each marketing campaign, while
primarily promotional, is the identification of the Jos. A. Bank name as
synonymous with high quality, updated classic clothing offered at value price
points. The Company has a database of over 2.4 million names of people who have
previously made a purchase from either the Company's retail store, Internet site
or catalog or have requested a catalog from the Company. Of these, over .7
million individuals have made such purchase or catalog request in the past 24
4
months. The Company selects names from this database based on expectations of
response to specific promotions which allows the Company to more efficiently use
its advertising dollars.
In the past two years, the Company has made significant investments in
its systems which has improved its ability to capture customer purchasing data.
The Company plans to increase its use of this data to improve its marketing
efficiency.
Product Specific Sales and Promotional Events. Throughout each season,
the Company promotes specific items or categories at specific prices that are
below the normal retail price. Examples are the trade-in sale whereby a customer
receives a fixed dollar amount off the purchase of a suit by "trading-in" an old
suit which is donated to charity and the "$199 Suit Sale". These sales are used
to complement promotional events and to meet the needs of the customers. At the
end of each season, the Company stores conduct clearance sales to promote the
sale of that season's merchandise.
Corporate Card. Certain organizations and companies can participate in
our corporate card program, through which all of their employees receive a 20%
discount off regularly-priced Jos. A. Bank merchandise. The card is honored at
all stores as well as for catalog and Internet purchases. Over 7,500 companies
nationally, from privately-owned to large public companies, are now
participating in the program. Participating companies are able to promote the
Card as a free benefit to their employees.
Apparel Incentive Program. Jos. A. Bank Clothiers apparel incentive
gift certificates are used by various companies as a reward for achievement for
their employees. The Company also redeems proprietary gift certificates marketed
by major premium/incentive companies through its stores and catalogs.
Distribution
The Company uses a centralized distribution system, under which all
merchandise is received, processed and distributed through the Company's
distribution facility located in Hampstead, Maryland. Merchandise received at
the distribution center is promptly inspected to insure expected quality in
workmanship and conformity to Company sizing specifications. The merchandise is
then allocated to individual stores, packed for delivery and shipped to the
stores, principally by common carrier. Each store generally receives a shipment
of merchandise twice a week from the distribution center; however, when
necessary because of a store's size or volume, a store can receive shipments
more frequently. Inventory of basic merchandise in the Company stores is
replenished regularly based on sales tracked through its point-of-sale
terminals. Shipments to catalog customers are also made from the central
distribution facility. To support the new store growth, the Company expects to
upgrade its current distribution center by late 2001.
Management Information Systems
In connection with the new millennium and to retain a competitive edge,
many of the Company's systems have been updated in the last two years. The
Company devoted significant efforts and resources in 1998 and 1999 to ensure
that its business-critical systems were "Year 2000 compliant" and has been able
to use its systems in 2000 without failure. In August, 1998 the Company
installed and implemented the latest version of its merchandising, warehouse,
sales audit, accounts payable and general ledger system (which included many
upgrades in addition to Y2K compliance), and in May 1999 completed the upgrade
of its catalog system. To improve customer service and customer database
management, the Company replaced its POS system in the second half of 1999. As a
result of these efforts, the Company's systems are more efficient and capable of
supporting future growth. By using these systems, the Company is able to capture
greater customer data and expects to increase its marketing efficiency using
such data. The Company also invested approximately $1 million in 2000 to design
and implement a new Internet site.
Manufacturing
In fiscal 1997, the Company manufactured approximately 15% of its
merchandise requirements at its two facilities located in Maryland. Prior to the
end of fiscal 1997, the Company decided to discontinue its then remaining
manufacturing operations and focus on its retailing expertise. In April 1998,
the Company sold its manufacturing operations to a third party (the
"Purchaser"). (See "Consolidated Financial Statements - Note 12" for a
discussion of discontinued manufacturing operations). In conjunction with the
sale, the Company entered into a long-term supply agreement with the purchaser
to buy certain clothing units from the Purchaser subject to certain conditions
and performance criteria. During 2000, the Company was advised that the
Purchaser discontinued the Company's former manufacturing operations and filed
for bankruptcy. In June 2000, the Company entered into an agreement with the
Purchaser (which was approved by the bankruptcy court) relieving the Company
from any further commitments to purchase merchandise under the supply agreement.
The Company purchased 4% of its merchandise requirements from the Purchaser
during fiscal 2000.
5
Competition
The Company competes primarily with other specialty retailers,
department stores and other catalogers engaged in the retail sale of apparel,
and to a lesser degree with other retailers of men's apparel. Among others, the
Company's store, Internet and catalog operations compete with Brooks Brothers,
Nordstrom, Men's Wearhouse and Lands End, as well as competitors in each store's
market. Many of these major competitors are considerably larger and have
substantially greater financial, marketing and other resources than the Company.
In general, the Company believes that it maintains its competitive
position based not only on its ability to offer its quality career clothing at
price points typically below those of its principal competitors for items of
comparable quality, but also on greater selection of merchandise within the
Company's focus on classic career clothing, the quality, consistency and value
of the Jos. A. Bank brand, and superior customer service.
Trademarks
The Company is the owner in the United States of the trademark "Jos. A.
Bank", "The Miracle Tie Collection" and "TRIO". These trademarks are registered
in the United States Patent and Trademark Office. A federal registration is
renewable indefinitely if the trademark is still in use at the time of renewal.
The Company's rights in the Jos. A. Bank trademark are a significant part of the
Company's business. Accordingly, the Company intends to maintain its trademark
and the related registration. The Company is not aware of any claims of
infringement or other challenges to the Company's right to use its trademark in
the United States.
In addition, the Company has registered "josbank.com" and various other
internet domain names. The Company intends to renew its domain names from time
to time for the conduct and protection of its e-commerce business.
Employees
As of April 19, 2001, the Company had 1,241 employees.
As of April 19, 2001, 124 employees worked in the tailoring and
distribution center, most of whom are represented by the Union of Needletrades
Industrial & Textile Employees. The current collective bargaining agreement
extends to April 30, 2003. The Company believes that union relations are good.
During the past 50 years, the Company has had only one work stoppage, which
occurred more than 20 years ago. The Company believes that its relations with
its non-union employees are also good. A small number of sales associates are
union members.
Item 2. DESCRIPTION OF PROPERTY
-----------------------
The Company owns its distribution and corporate office facility located
in the Maryland area, subject to certain financing liens. (See "Consolidated
Financial Statements -- Note 5.") The Company believes that its existing
facility is well maintained and in good operating condition. The table below
presents certain information relating to the Company's corporate properties as
of April 19, 2001:
Gross Owned/
Location Square Feet Leased Primary Function
- -------- ----------- ------ ----------------
Hampstead, Maryland 210,000 Owned Corporate offices, distribution center,
catalog fulfillment and regional tailoring
overflow shop
As of April 19, 2001, the Company had 107 Company-operated stores,
including its outlet stores, all of which were leased. The full line stores
average 6,500 square feet as of the beginning of fiscal 2001, including selling,
storage, tailor shop, and service areas. The full line stores range in size from
approximately 2,600 square feet to approximately 18,900 square feet. The leases
typically provide for an initial term of between 5 and 10 years, with renewal
options permitting the Company to extend the term for between 5 and 10 years
thereafter. The Company generally has been successful in renewing its store
leases as they expire. In most cases the Company pays a fixed annual base rent
plus real estate taxes, insurance and utilities and, other than free standing
locations, to make contributions toward the common area operating costs. Most of
the Company's lease arrangements provide for an increase in annual fixed rental
payments during the lease term.
During fiscal 2000, the Company sold its former coat and pant sewing
and central pressing plant located in Baltimore, Maryland. The plant had been
sub-leased in connection with the disposition of the Company's manufacturing
operations in April 1998.
6
Item 3. LEGAL PROCEEDINGS
-----------------
On December 14, 1995, the Company filed a Verified Complaint in the
United States District Court for the Northern District of Maryland (case No. MJG
95-3826) against J.A.B. of Lexington, Inc. and its principals (the "Defendants")
alleging federal trademark infringement, common law trademark and service mark
infringement, statutory unfair competition, common law unfair competition,
breach of franchise agreement, breach of lease, breach of promissory note and
breach of security agreement. Damages sought in the Verified Complaint were
unspecified. The Defendants counterclaimed against the Company seeking
declaratory judgements, compensatory damages and punitive damages. In March,
2000, the Company settled the dispute at no cost to either party.
The Company has been named as a defendant in legal actions arising from
its normal business activities. Although the outcome of these lawsuits or other
proceedings against the Company cannot be accurately predicted, the Company does
not expect that any such liability will have a material adverse effect on the
business, net assets or financial position of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the Company's security holders
during the quarter ended February 3, 2001.
PART II
Item 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
(a) Market Information.
The Company's Common Stock is listed on The Nasdaq National Market
("NASDAQ") under the trading symblol "JOSB". The following table sets forth,
for the periods indicated, the range of high and low bid prices for the Common
Stock, as reported on NASDAQ. The approximate high and low closing prices for
the Common Stock tabulated below represent inter-dealer quotations which do not
include retail mark-ups, mark-downs or commissions. Such prices do not
necessarily represent actual transactions.
Fiscal 1999 Fiscal 2000
----------- -----------
High Low High Low
---- --- ---- ---
1st Quarter $ 8.00 $ 6.00 $ 4.88 $ 3.19
2nd Quarter 8.13 5.25 5.47 3.63
3rd Quarter 5.50 3.00 4.75 3.94
4th Quarter 4.00 2.63 6.38 4.00
1st Quarter (through April 19, 2001) $ 7.25 $ 5.00
On April 19, 2001 the closing sale price of the Common Stock was $ 6.37.
(b) Holders of Common Stock
-----------------------
At April 19, 2001, there were 136 holders of record of the
Company's Common Stock.
(c) Dividend Policy
---------------
The Company intends to retain its earnings to finance the development
and expansion of its business and for working capital purposes, and therefore
does not anticipate paying any cash dividends in the foreseeable future. In
addition, the Company's Credit Agreement prohibits the Company from paying cash
dividends.
7
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
The following selected consolidated financial data with respect to each
of the fiscal years in the five-year period ended February 3, 2001 have been
derived from the Company's audited Consolidated Financial Statements. Fiscal
year 2000 was a 53-week year and all other years consisted of 52-weeks, each of
which ended on the Saturday closest to the end of January of the respective
year. The information should be read in conjunction with the Consolidated
Financial Statements and Notes thereto that appear elsewhere in the 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Fiscal Years
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(in thousands, except per share data)
Consolidated Statements of Income Information:
Net Sales: $153,191 $172,174 $187,163 $193,529 $206,252
Cost of goods sold 82,598 92,001 96,281 100,030 104,943
-------- -------- -------- -------- --------
Gross Profit 70,593 80,173 90,882 93,499 101,309
-------- -------- -------- -------- --------
Operating Expenses:
General and administrative 16,374 17,695 18,806 18,965 20,609
Sales and marketing 50,924 55,609 62,249 67,694 71,264
Store opening costs 229 301 617 153 363
Executive payouts and other one-time charges -- -- -- 3,102(c) --
-------- -------- -------- -------- --------
Total operating expenses 67,527 73,605 81,672 89,914 92,236
-------- -------- -------- -------- --------
Operating income 3,066 6,568 9,210 3,585 9,073
Interest expense, net 1,946 2,501 1,762 1,346 1,034
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes 1,120 4,067 7,448 2,239 8,039
Provision for income taxes 437 1,590 1,539(b) 873 3,015
-------- -------- -------- -------- --------
Income from continuing operations 683 2,477 5,909 1,366 5,024
Loss on disposal of manufacturing operations,
net of tax(a) -- (1,512) -- -- --
Loss from discontinued operations, net of tax(a) (432) (266) (51) -- --
-------- -------- -------- -------- --------
Net income $ 251 $ 699 $ 5,858(b) $ 1,366 $ 5,024
-------- -------- -------- -------- --------
Per Share Information (diluted):
Income from continuing operations $ 0.10 $ 0.36 $ 0.85(b) $ 0.20 $ 0.80
Loss on disposal of manufacturing operations -- (0.22) -- -- --
Loss from discontinued operations (0.06) (0.04) (0.01) -- --
-------- -------- -------- -------- --------
Net income per share $ 0.04 $ 0.10 $ 0.84 $ 0.20 $ 0.80
-------- -------- -------- -------- --------
Weighted average number of shares
outstanding (diluted) 6,824 6,864 6,976 6,892 6,249
Balance Sheet Information (As of End of Fiscal Year):
Working capital $ 28,989 $ 26,142 $ 27,062 $ 26,492 $ 28,650
Total assets 79,604 77,144 82,515 84,751 88,954
Total debt 18,415 12,999 9,177 9,366 6,869
Total long-term obligations (including debt) 21,472 15,105 11,808 11,725 9,893
Shareholders'equity 35,699 36,398 42,313 43,786 45,708
Number of stores 79 87 103 108 116
(a) Represents disposal of manufacturing operations in 1997. All years
presented herein have been restated to reflect this discontinued operation.
(b) Includes a benefit of $1,365 or $.20 per share related to the reversal of a
valuation allowance which had been recorded in 1995 related to tax net
operating losses.
(c) Represents payouts to the Company's former Chairman/CEO and President,
costs to hire and relocate successors, and the costs to discontinue an
unprofitable business.
8
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Overview
The Company's net income of $.80 per share in fiscal 2000 increased 70%
compared to adjusted income of $.47 per share in fiscal 1999 (before the $3.1
million one-time charges in fiscal 1999). During fiscal 2000, the Company
continued a trend that began in the fourth quarter of 1999 when the Company
generated record earnings (excluding one-time charges) for one quarter. The
Company posted record earnings results in three of its four quarters in fiscal
2000, including the setting of another record in the fourth quarter.
The Company expects to open up to 30 new stores during 2001 as part of
its plan to open between 75-100 new stores between fiscal 2000 and the end of
fiscal 2003. The new stores that have been targeted are mostly in existing
markets in specialty retail centers. The Company has determined that its stores
perform best in specialty retail centers with co-tenancy of other high-end
retailers.
The Company is also committed to growing its Internet business, through
increased marketing and a state-of-the-art website. The Company's new internet
site went "live" in August 2000 and has many features such as real-time
inventory status, order conformation and product search capabilities.
The Company negotiated a $50 million Credit Agreement with its bank
through April 2004 replacing its existing credit agreement. The revised
agreement increased the borrowing capacity, lowered the variable interest rate
and reduced the covenant requirements.
In April 2000, the Company repurchased 896,400 shares of its
outstanding Common Stock from a shareholder at a cost of $3.1 million ($3.50 per
share). The shares have been placed in treasury at cost. These shares
represented approximately 13% of the then outstanding 6,852,000 shares. The
purchase was financed using funds borrowed under its prior Credit Agreement
prior to the previously mentioned amendment.
The Company's availability in excess of outstanding borrowings, as
supported by the existing borrowing base under its Credit Agreement, has
increased to $36.5 million at April 19, 2001 compared to $26.4 million at the
same time in 2000. Total bank debt decreased to $2.7 million at April 19, 2001
compared to $9.9 million at the same time in 2000.
Results of Operations
The following table is derived from the Company's Consolidated Statements
of Income and sets forth, for the periods indicated, the items included in the
Consolidated Statements of Income expressed as a percentage of net sales.
Percentage Of Net Sales
Fiscal Years
1998 1999 2000
---- ---- ----
Net Sales 100.0% 100.0% 100.0%
------ ------ -----
Cost of goods sold 51.4 51.7 50.9
Gross profit 48.6 48.3 49.1
General and administrative expenses 10.0 9.8 10.0
Sales and marketing expenses 33.3 35.0 34.6
Store opening costs 0.3 -- 0.2
Executive payouts and other one-time charges -- 1.6 --
------ ------ -----
Operating income 4.9 1.9 4.4
Interest expense, net (0.9) (0.7) (0.5)
------ ------ -----
Income from continuing operations before income taxes 4.0 1.2 3.9
Income taxes (0.8) (0.5) (1.5)
------ ------ -----
Income from continuing operations, net of tax 3.2 0.7 2.4
Loss from discontinued operations, net of tax (0.1) -- --
------ ------ -----
Net income 3.1% 0.7% 2.4%
------ ------ -----
9
Fiscal 2000 Compared to Fiscal 1999
Net Sales - Net sales increased 6.6% in fiscal 2000, primarily from a 6.8%
--------
increase in comparable store sales, a 188% increase in Internet sales and a
11.7% decrease in catalog sales from fiscal 1999. The decrease in catalog sales
was caused primarily by cannibalization from the Internet. Sales were driven by
increases in Corporate Casual and Sportswear as the Company continues to address
the changing clothing needs of men in the workplace.
Gross Profit - Gross profit as a percentage of sales increased to 49.1% in
------------
fiscal 2000 from 48.3% in fiscal 1999 as the Company reduced promotional
activities for its better selling products. In addition, several categories,
including Corporate Casual, Sportswear and Ties, generated gross profit
percentage increases.
General and Administrative Expenses - General and administrative expenses
-----------------------------------
increased to 10.0% of sales from 9.8% of sales in fiscal 1999 primarily from a
$2.3 million increase in incentive compensation expense partially offset by a
decrease in professional fees and travel expenses.
Sales and Marketing Expenses - Sales and marketing expense (which consist
----------------------------
primarily of store occupancy, advertising and store payroll costs) decreased to
34.6% of sales in 2000 from 35.0% of sales in 1999 primarily as a result of
leverage of expenses in existing stores which had a 6.8% sales increase and
lower advertising costs. This decrease was partially offset by higher store
payroll and occupancy costs as a percent of sales in the new stores.
Store Opening Costs - Store opening costs increased $.2 million in fiscal
-------------------
2000 compared to fiscal 1999 as the Company opened 10 new stores in 2000
(including two outlet stores) compared to five new stores in 1999.
Interest Expense - Interest expense decreased $.3 million in fiscal 2000
----------------
due primarily to a lower average outstanding debt balance in 2000 compared to
fiscal 1999. The weighted average interest rate increased in 2000 due primarily
to increases in the prime rate.
Income Taxes - The effective tax rate in fiscal 2000 was 37.5% compared to
------------
39.0% in fiscal 1999. The decrease resulted from lower effective state tax
rates.
Fiscal 1999 Compared to Fiscal 1998
Net Sales - Net sales increased 3.4% over the prior year to $193.5 million
---------
in fiscal 1999 from $187.2 million in fiscal 1998. The increase in net sales was
due primarily to new stores.
Gross Profit - Gross profit as a percent of sales decreased .3 percentage
------------
points to 48.3% in fiscal 1999 from 48.6% in fiscal 1998. The slight decrease
was due primarily to the mix of product sold.
General and Administrative Expenses - General and administrative expenses
-----------------------------------
continued to decline as a percent of sales to 9.8% in fiscal 1999 from 10.0% and
10.3% in fiscal years 1998 and 1997, respectively, as the Company continues to
leverage its overhead while opening new stores. Total general and administrative
expenses increased to $19.0 million in fiscal 1999 compared to $18.8 million in
fiscal 1998. Increases in payroll, professional fees, travel and other expenses
were partially offset by a $1.6 million reduction in incentive compensation
expense.
Sales and Marketing Expense - Sales and marketing expenses increased $5.4
---------------------------
million to $67.7 million in fiscal 1999 from $62.2 million in fiscal 1998. This
increase was primarily due to an increase in marketing expense and additional
store occupancy and payroll costs in new stores. The higher marketing expense
was primarily attributable to increased radio and newspaper advertising needed
to increase customer traffic in stores. The higher occupancy and payroll costs
relate to additional stores opened in 1998 and 1999.
Store Opening Costs - Store opening costs decreased $.5 million as the
-------------------
Company opened five stores in fiscal 1999 compared to 16 in fiscal 1998.
Executive Payouts and Other One-Time Charges - Executive payouts consisted
--------------------------------------------
of a $2.2 million charge resulting from the retirement of the Company's Chairman
and CEO and a $.4 million charge related to the payout of its former President.
Other one-time charges included approximately $.3 million related to hiring and
relocation of new corporate officers and $.2 million resulting from
discontinuing an unprofitable business.
Interest Expense - Interest expense decreased $.4 million to $1.4 million
----------------
in fiscal 1999 compared to $1.8 million in 1998. This improvement was due
primarily to a reduction in the total debt outstanding in fiscal 1999 compared
to the prior year. The average daily bank debt balance decreased to $9.9 million
in 1999 from $12.5 million in 1998.
Income Taxes - The fiscal 1999 effective tax rate was 39% compared to 20.7%
------------
in fiscal 1998. The fiscal year 1998 rate was positively impacted by the
elimination of the valuation reserve.
10
Liquidity and Capital Resources
The Company's availability in excess of outstanding borrowings, as
supported by the existing borrowing base under its Credit Agreement, increased
to $36.5 million at April 19, 2001 compared to $26.4 million at the same time in
2000. In March 2001, the Company issued $5.5 million term debt (the "Term Debt")
secured by its distribution center to finance part of its growth.
The following table summarizes the Company's sources and uses of funds
as reflected in the Condensed Consolidated Statements of Cash Flows:
Years Ended
-----------
Jan. 29, Feb. 3,
2000 2001
---- ----
Cash provided by (used in):
Operating activities $ 7,381 $11,059
Investing activities (6,780) (3,167)
Financing activities 251 (5,599)
Discontinued operations (513) (254)
------- -------
Net increase in cash and cash equivalents $ 339 $ 2,039
------- -------
Cash provided by the Company's operating activities (net) was due primarily
to operating results and an increase in accounts payable leverage. Cash used in
investing activities relates primarily to leasehold improvements in new,
renovated and relocated stores. The Company spent approximately $3.7 million on
capital expenditures in fiscal 2000 primarily for the buildout of new stores and
approximately $1 million to install a new Internet site. Cash used in financing
activities relates primarily to repayments/borrowings of the revolving loan
under the Credit Agreement and the repurchase of $3.1 million of Common Stock.
The Company expects to spend between $15 and $17 million on capital
expenditures in fiscal 2001, primarily to open up to 30 new stores, to renovate
several stores and to install a new warehouse distribution system to accommodate
future store growth. The capital expenditures will be financed through
operations, the Credit Agreement and the Term Debt.
Risks
The Company's plans and beliefs concerning future operations contained
herein are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those forecast due to a variety of factors that can adversely affect the
Company's expansion plans, operating results, liquidity and financial condition
such as risks associated with economic, weather and other factors affecting
consumer spending, the ability of the Company to finance its expansion plans,
the mix of goods sold, pricing, availability of lease sites for new stores and
other competitive factors. These risks should be carefully reviewed before
making any investment decision.
Growth Risks. A significant portion of the Company's growth
has resulted and is expected to continue to result from the opening of
new stores. While the Company believes that it will continue to be able
to obtain suitable locations for new stores, negotiate acceptable lease
terms, hire qualified personnel and open and operate new stores on a
timely and profitable basis, no such assurances can be made. As the
Company continues its expansion program, the opening of stores may
adversely affect catalog sales in such markets, and the opening of
additional stores in existing markets may adversely affect sales of
established stores.
Competition. The retail apparel business is highly competitive
and is expected to remain so. The Company competes primarily with other
specialty retailers, department stores and other catalogers engaged in
the retail sale of apparel, and to a lesser degree with other apparel
retailers. Many of these competitors have significantly greater
financial, marketing and other resources than the Company. The Company
believes that its emphasis on classic styles makes it less vulnerable
to changes in fashion trends than many apparel retailers; however, the
Company's sales and profitability depend upon the continued demand for
its classic styles.
Reliance on Key Suppliers. Historically, the Company has
bought a substantial portion of its products from a limited number of
suppliers. The loss of any one of these suppliers could cause a delay
in the Company's sales process. Any significant interruption in the
Company's product supply could have an adverse effect on its business
due to delays in finding alternative sources and could result in
increased costs to the Company.
11
Growth by Acquisition, etc. The Company may from time to time
hold discussions and negotiations with (i) potential investors who
express an interest in making an investment in or acquiring the
Company, (ii) potential joint venture partners looking toward the
formation of strategic alliances and (iii) companies that represent
potential acquisition or investment opportunities for the Company.
There can be no assurance any definitive agreement will be reached
regarding the foregoing, nor does the Company believe that any such
agreement is necessary to implement successfully its strategic plans.
Seasonality
Historically, the Company's operations had not been greatly affected by
seasonal fluctuations. Although variations in sales volumes do exist between
quarters, the Company believes the nature of its merchandise helps to stabilize
demand between the different periods of the year. However, as the Company's
merchandise continues to include more Corporate Casual and Sportswear, profits
generated during the fourth quarter have become a larger portion of annual
profits.
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At February 3, 2001, there were no derivative financial instruments. In
addition, the Company does not believe it is materially at risk for changes in
market interest rates or foreign currency fluctuations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements listed in Item 14(a) 1 and 2 are included in the
Report beginning on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Item 10 is omitted by the Company in accordance with General
Instruction G to Form 10-K. The Company will disclose the information required
under this item either by (a) incorporating the information by reference from
the Company's definitive proxy statement if filed by June 4, 2001 (the first
business day following 120 days from the close of its fiscal year ending
February 3, 2001) or (b) filing an amendment to this Form 10-K which contains
the required information by June 4, 2001.
Item 11. EXECUTIVE COMPENSATION
----------------------
Item 11 is omitted by the Company in accordance with General
Instruction G to Form 10-K. The Company will disclose the information required
under this item either by (a) incorporating the information by reference from
the Company's definitive proxy statement if filed by June 4, 2001 (the first
business day following 120 days from the close of its fiscal year ending
February 3, 2001) or (b) filing an amendment to this Form 10-K which contains
the required information by June 4, 2001.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
Item 12 is omitted by the Company in accordance with General
Instruction G to Form 10-K. The Company will disclose the information required
under this item either by (a) incorporating the information by reference from
the Company's definitive proxy statement if filed by June 4, 2001 (the first
business day following 120 days from the close of its fiscal year ending
February 3, 2001) or (b) filing an amendment to this Form 10-K which contains
the required information by June 4, 2001.
Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
---------------------------------------------
Item 13 is omitted by the Company in accordance with General
Instruction G to Form 10-K. The Company will disclose the information required
under this item either by (a) incorporating the information by reference from
the Company's definitive proxy statement if filed by June 4, 2001 (the first
business day following 120 days from the close of its fiscal year ending
February 3, 2001) or (b) filing an amendment to this Form 10-K which contains
the required information by June 4, 2001.
12
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
-----------------------------------------------------------------
(a) The following Financial Statements of Jos. A. Bank Clothiers, Inc.,
the notes thereto, and the related reports thereon of the independent public
accountants are filed under Item 8 of this report:
1. Financial Statements Page
Report of Independent Public Accountants. . . . . . . . . . . . . . F
Consolidated Balance Sheets as of January 29, 2000 and
February 3, 2001. . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Statements of Income for the Years Ended
January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-2
Consolidated Statements of Shareholders' Equity for the Years Ended
January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-3
Consolidated Statements of Cash Flows for the Years Ended
January 30, 1999, January 29, 2000 and February 3, 2001 . . . . . . F-4
Notes to Consolidated Financial Statements . . . . . . . .. . . . . F-5
2. Financial Statement Schedules
All required information is included within the Consolidated
Financial Statements and the notes thereto.
(b) Reports on Forms 8-K
- None filed during the fourth quarter of fiscal 2000.
(c) Exhibits
3.1 --Restated Certificate of Incorporation of the Company.*1 . . . . . .
3.2 --By-laws of the Company, together with all amendments thereto.*1 . .
4.1 --Form of Common Stock certificate.*1 . . . . . . . . . . . . . . . .
4.2 --Amended and Restated Stockholders Agreement, dated as of
January 29, 1994, among the parties named therein.*1 . . . . . . .
4.3 --Rights Agreement dated as of September 19, 1997*5 . . . . . . . . .
4.4 --Certificate of Designation governing the Company's
Series A Preferred Stock*5. . . . . . . . . . . . . . . . . . . . .
10.1 --1994 Incentive Plan*1 . . . . . . . . . . . . . . . . . . . . . . .
10.1(a) --Amendments to Incentive Plan dated as of October 6, 1997, *6. . . .
10.4(f) --Fourth Amended and Restated Credit Agreement, April 30, 1996,
by and among the Company, Wells Fargo Bank, N.A. *3 . . . . . . . .
10.4(g) --Combined amendment number one to fourth amended and restated credit
agreement, December 18, 2000, by and between the Company and
Foothill Capital Corporation, filed herewith . . . . . . . . . . . .
10.7(a) --Amended and Restated Employment Agreement, dated as of September 19,
1997, between Frank Tworecke and Jos. A. Bank Clothiers, Inc.,*6 . .
10.7(b) --Amendment to the Employment Agreement dated February 9, 1999
between Frank Tworecke and Jos. A. Bank Clothiers, Inc., *7. . . . .
10.8(a) --Amended and Restated Employment Agreement, dated as of
September 19, 1997, between David E. Ullman and Jos. A. Bank
Clothiers, Inc., *6 . . . . . . . . . . . . . . . . . . . . . . . .
10.9 --Jos. A. Bank Clothiers, Inc. Retirement and Savings Plan and Trust
Agreement as amended and restated effective April 1, 1994.*4 . . . .
10.10 --Collective Bargaining Agreement between Retail Employees Union Local
340, Amalgamated Clothing and Textile Workers Union, AFL-CIO and
Jos. A. Bank Clothiers, Inc.*4 . . . . . . . . . . . . . . . . . . .
10.12 --Employment Agreement, dated September 19, 1997, between Gary W.
Cejka and Jos. A. Bank Clothiers, Inc., *6 . . . . . . . . . . . . .
10.13 --Employment Agreement, dated September 19, 1997, between Charles D.
Frazer and Jos. A. Bank Clothiers, Inc., *6. . . . . . . . . . . . .
10.13(a) --Amendment to the Employment Agreement dated February 14, 1999
between Charles D. Frazer and Jos. A. Bank Clothiers, Inc., *7 . . .
13
10.15 --Employment Agreement dated August 31, 1998 between J.F. Timothy
Carroll and Jos. A. Bank Clothiers, Inc., *7 . . . . . . . . . . . .
10.15(a) --Employment Agreement dated November 1, 1999 between Robert N.
Wildrick and Jos. A. Bank Clothiers, Inc., *8 . . . . . . . . . . .
10.16 --Amendment to Employment Agreement dated March 6, 2000 between Robert
N. Wildrick and Jos. A. Bank Clothiers, Inc.,*9 . . . . . . . . . .
10.17 --Employment Agreement dated November 30, 1999 between Robert Hensley
and Jos. A. Bank Clothiers, Inc., *8 . . . . . . . . . . . . . . . .
10.17(a) --First Amendment, dated as of January 1, 2001, to Employment
Agreement between Robert Hensley and Jos. A. Bank Clothiers, Inc.,
filed herewith . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.17(b) --Second Amendment, dated as of March 16, 2001, to Employment
Agreement between Robert Hensley and Jos. A. Bank Clothiers,
Inc., filed herewith . . . . . . . . . . . . . . . . . . . . . . . .
10.18 --Employment Agreement dated December 21, 1999 between
R. Neal Black and Jos. A. Bank Clothiers, Inc., *9 . . . . . . . . .
10.18(a) --First Amendment dated as of March 16, 2001, to Employment Agreement
between R. Neal Black and Jos. A. Bank Clothiers, Inc., filed
herewith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.19 --Collective Bargaining Agreement dated March 1, 2000 by and between
Joseph A. Bank Mfg. Co., Inc. and Baltimore Regional Joint Board,
UNITE, filed herewith. . . . . . . . . . . . . . . . . . . . . . . .
10.20 --Employment offer letter, dated November 20, 2000, from Jos. A. Bank
Clothiers, Inc. to Jerry DeBoer, filed herewith. . . . . . . . . . .
21.1(b) --Company subsidiaries, filed herewith . . . . . . . . . . . . . . . .
*1 Incorporated by reference to the Company's Registration
Statement on Form S-1 filed May 3, 1994.
*2 Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended January 28, 1995.
*3 Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended February 3, 1996.
*4 Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended February 1, 1997.
*5 Incorporated by reference to the Company's Form 8-K
dated September 22, 1997.
*6 Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended January 31, 1998.
*7 Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended January 30, 1999.
*8 Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 30, 1999.
*9 Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended January 29, 2000.
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Hampstead, State of Maryland, on May 3, 2001.
14
JOS. A. BANK CLOTHIERS, INC.
(registrant)
By: /s/: Robert N. Wildrick
--------------------------
ROBERT N. WILDRICK
CHIEF EXECUTIVE OFFICER AND PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities and
on the dates indicated.
NAME TITLE DATE
/s/: Robert N. Wildrick Director, Chief Executive Officer and President May 3, 2001
- ----------------------------- (Principal Executive Officer)
/s/: R. Neal Black Executive Vice President, Marketing & Merchandising May 3, 2001
- -----------------------------
/s/: Robert B. Hensley Executive Vice President, Stores & Operations May 3, 2001
- -----------------------------
/s/: David E. Ullman Executive Vice President, Chief Financial Officer May 3, 2001
- -----------------------------
/s/: Richard E. Pitts Vice President - Treasurer (Principal Accounting Officer) May 3, 2001
- -----------------------------
/s/: Andrew A. Giordano Director, Chairman of the Board May 3, 2001
- -----------------------------
/s/: Gary S. Gladstein Director May 3, 2001
- -----------------------------
/s/: Peter V. Handal Director May 3, 2001
- -----------------------------
/s/: David A. Preiser Director May 3, 2001
- -----------------------------
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Jos. A.Bank Clothiers, Inc.:
We have audited the accompanying consolidated balance sheets of Jos. A. Bank
Clothiers, Inc. (a Delaware corporation) and subsidiaries as of January 29, 2000
and February 3, 2001, and the related consolidated statements of income,
shareholders' equity and cash flows for the years ended January 30, 1999,
January 29, 2000 and February 3, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jos. A. Bank Clothiers, Inc.
and subsidiaries as of January 29, 2000 and February 3, 2001, and the results of
their operations and their cash flows for the years ended January 30, 1999,
January 29, 2000 and February 3, 2001, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
Baltimore, Maryland
March 5, 2001 (except with respect to
the matter discussed in Note 14, as to
which the date is March 27, 2001)
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF JANUARY 29, 2000 AND FEBRUARY 3, 2001
(In Thousands, Except Share Information)
ASSETS
Jan. 29, 2000 Feb. 3, 2001
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,087 $ 3,126
Accounts receivable 2,601 2,724
Inventories 46,387 50,449
Prepaid expenses and other current assets 3,178 5,329
Deferred income taxes 2,479 375
----------- ----------
Total current assets 55,732 62,003
NONCURRENT ASSETS:
Property, plant and equipment, net 27,247 25,632
Other noncurrent assets, net 73 57
Deferred income taxes 1,699 1,262
----------- ----------
Total assets $ 84,751 $ 88,954
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,195 $ 16,663
Accrued expenses 14,573 16,268
Current portion of long-term debt 1,218 422
Net current liabilities of discontinued operations 254 --
----------- ----------
Total current liabilities 29,240 33,353
NONCURRENT LIABILITIES:
Long-term debt 8,148 6,447
Deferred rent 3,577 3,446
----------- ----------
Total liabilities 40,965 43,246
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par, 20,000,000 shares authorized,
7,039,442 issued and 6,830,027 outstanding as of
January 29, 2000 and 7,061,442 issued and 5,955,627
outstanding as of February 3, 2001 70 71
Preferred stock, $1.00 par, 500,000 shares authorized, none
issued or outstanding -- --
Additional paid-in capital 56,500 56,535
Accumulated deficit (10,864) (5,840)
Less 209,415 shares of common stock held in treasury at January 29,
2000, and 1,105,815 held at February 3, 2001, at cost (1,920) (5,058)
----------- ----------
Total shareholders' equity 43,786 45,708
----------- ----------
Total liabilities and shareholders' equity $ 84,751 $ 88,954
----------- ----------
The accompanying notes are an integral part of these consolidated balance
sheets.
F-1
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001
(In Thousands, Except Per Share Information)
Years Ended
------------------------------------------------
Jan. 30, 1999 Jan. 29, 2000 Feb. 3, 2001
------------- ------------- ------------
NET SALES $ 187,163 $ 193,529 $ 206,252
COST OF GOODS SOLD 96,281 100,030 104,943
- -----------------------------------------------------------------------------------------------------
Gross Profit 90,882 93,499 101,309
- -----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
General and administrative 18,806 18,965 20,609
Sales and marketing 62,249 67,694 71,264
Store opening costs 617 153 363
Executive payouts and other one-time charges -- 3,102 --
- -----------------------------------------------------------------------------------------------------
Total operating expenses 81,672 89,914 92,236
- -----------------------------------------------------------------------------------------------------
OPERATING INCOME 9,210 3,585 9,073
Interest expense, net 1,762 1,346 1,034
- -----------------------------------------------------------------------------------------------------
Income from continuing operations before
provision for income taxes 7,448 2,239 8,039
Provision for income taxes 1,539 873 3,015
- -----------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 5,909 1,366 5,024
Discontinued operations, net of tax:
Loss from discontinued operations (51) -- --
- -----------------------------------------------------------------------------------------------------
Net income $ 5,858 $ 1,366 $ 5,024
- -----------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Income from continuing operations:
Basic $ 0.87 $ 0.20 $ 0.82
Diluted $ 0.85 $ 0.20 $ 0.80
Discontinued operations (net of tax):
Basic $ (0.01) $ -- $ --
Diluted $ (0.01) $ -- $ --
Net income:
Basic $ 0.86 $ 0.20 $ 0.82
Diluted $ 0.84 $ 0.20 $ 0.80
Weighted average shares outstanding:
Basic 6,791 6,801 6,136
Diluted 6,976 6,892 6,249
The accompanying notes are an integral part of these consolidated statements.
F-2
JOS. A. BANK CLOTHIERS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001
(In Thousands)
Additional Total Total
Common Paid-In Accumulated Treasury Shareholders'
Stock Capital Deficit Stock Equity
------- ---------- ------------ -------- ------------
- -----------------------------------------------------------------------------------------------------------
BALANCE, January 31, 1998 $ 70 $ 56,336 $ (18,088) $ (1,920) $ 36,398
- -----------------------------------------------------------------------------------------------------------
Net Income -- -- 5,858 -- 5,858
Net proceeds from issuance of
common stock (875 shares)
pursuant to Incentive Option Plan -- 5 -- -- 5
Stock based compensation -- 52 -- -- 52
- -----------------------------------------------------------------------------------------------------------
BALANCE, January 30, 1999 70 56,393 (12,230) (1,920) 42,313
- -----------------------------------------------------------------------------------------------------------
Net income -- -- 1,366 -- 1,366
Net proceeds from issuance of
common stock (38,000 shares)
pursuant to Incentive Option Plan -- 62 -- -- 62
Stock based compensation -- 45 -- -- 45
- -----------------------------------------------------------------------------------------------------------
BALANCE, January 29, 2000 70 56,500 (10,864) (1,920) 43,786
- -----------------------------------------------------------------------------------------------------------
Net income -- -- 5,024 -- 5,024
Net proceeds from issuance of
common stock (22,000 shares)
pursuant to Incentive Option Plan 1 35 -- -- 36
Repurchase of 896,400 shares of
Common Stock at $3.50 per share -- -- -- (3,138) (3,138)
- -----------------------------------------------------------------------------------------------------------
BALANCE, February 3, 2001 $ 71 $ 56,535 $ (5,840) $ (5,058) $ 45,708
- -----------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
F-3
JOS. A. BANK CLOTHIERS,INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001
(In Thousands)
Years Ended
--------------------------------------
Jan.30,1999 Jan.29,2000 Feb.3,2001
----------- ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,858 $ 1,366 $ 5,024
Loss from discontinued operations 51 -- --
- ----------------------------------------------------------------------------------------------------------------------
Income from continuing operations 5,909 1,366 5,024
Adjustments to reconcile net income
to net cash provided by operating activities:
Deferred tax expense 827 705 2,541
Depreciation and amortization 4,105 3,973 4,195
Loss on disposition of assets -- 107 32
Stock based compensation 52 45 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (71) 207 (123)
Increase in inventories (4,714) (1,559) (4,062)
Decrease (increase) in prepaid expenses and other current assets 149 1,011 (2,151)
Decrease in other noncurrent assets 53 439 16
Increase (decrease) in accounts payable 693 (817) 3,468
Decrease in long-term pension liability (437) (80) --
Increase in accrued expenses 2,730 2,069 2,250
Increase (decrease) in deferred rent 188 (85) (131)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities
of continuing operations 9,484 7,381 11,059
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,319) (6,780) (3,695)
Proceeds from disposal of assets -- -- 528
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities of
continuing operations (6,319) (6,780) (3,167)
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving loan agreement 36,549 60,161 60,108
Repayment of borrowings under revolving loan
agreement (40,329) (61,311) (62,178)
Borrowing of other long-term debt 277 1,686 --
Repayment of other long-term debt (319) (347) (427)
Repurchase of Common Stock into Treasury -- -- (3,138)
Net proceeds from issuance of common stock 5 62 36
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities
of continuing operations (3,817) 251 (5,599)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) discontinued
operations 836 (513) (254)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 184 339 2,039
CASH AND CASH EQUIVALENTS,
beginning of year 564 748 1,087
- ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of year $ 748 $ 1,087 $ 3,126
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
F-4
JOS. A. BANK CLOTHIERS, INC. AND SUBSIDIARIES NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
JANUARY 30, 1999, JANUARY 29, 2000 and FEBRUARY 3, 2001
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Description of Business - Jos. A. Bank Clothiers, Inc. ("Clothiers") is a
nationwide retailer of classic men's clothing through conventional retail
stores, catalog and internet direct marketing and franchisees.
Fiscal Year - The Company maintains its accounts on a fifty-two/fifty-three week
fiscal year ending on the Saturday nearest to January 31. The fiscal years ended
January 30, 1999 (fiscal 1998) and January 29, 2000 (fiscal 1999), each
contained fifty-two weeks. The fiscal year ended February 3, 2001 (fiscal 2000)
contained fifty-three weeks.
Basis of Presentation - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation - The consolidated financial statements include the
accounts of Clothiers and its wholly-owned subsidiaries (collectively referred
to as the "Company"). All significant intercompany balances and transactions
have been eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include overnight
investments. Interest expense, net, includes interest income of approximately
$10,000, $1,000 and $50,000 in fiscal 1998, 1999 and 2000, respectively.
Supplemental Cash Flow Information -Interest and income taxes paid were as
follows (in thousands):
Years Ended
Jan. 30, Jan. 29, Feb. 3,
1999 2000 2001
-------- --------- -------
Interest paid $1,462 $1,162 $ 965
Income taxes paid $ 252 $ 163 $ 363
Inventories - Inventories are stated at the lower of first-in first-out, cost or
market. The Company capitalizes into inventories certain warehousing and
delivery costs associated with getting its merchandise to the point of sale.
Catalogs and Promotional Materials - Costs related to mail order catalogs and
promotional materials are included in prepaid expenses and other current assets.
These costs are amortized over the expected periods of benefit, not to exceed
six months. At January 29, 2000 and February 3, 2001, prepaid catalog and
promotional materials were approximately $1,625,000 and $1,696,000,
respectively, representing expenditures for the applicable subsequent spring
catalog.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. The Company depreciates and amortizes property, plant and equipment on a
straight-line basis over the following estimated useful lives:
Estimated
Asset Class Useful Lives
------------- ------------
Buildings and improvements 25 years
Equipment 3-10 years
Furniture and fixtures 10 years
Leasehold improvements Initial term of
lease, not to
exceed 10 years
Other Noncurrent Assets - Other noncurrent assets includes deferred financing
costs of $0 and $57,000 as of January 29, 2000 and February 3, 2001,
respectively. Deferred financing costs were incurred in connection with the
Company's bank credit agreement described in Note 5 and are being amortized as
additional interest expense over the remaining term of the agreement using the
effec-tive interest method. Other noncurrent assets also include $73,000 of
notes receivable as of January 29, 2000.
Fair Value of Financial Instruments - For cash and equivalents, the carrying
amount is a reasonable estimate of fair value. For long-term debt, rates
available for debt with similar terms and remaining maturities are used to
estimate the fair value of existing debt.
Franchise Revenue Recognition - Initial franchise fees for a store are generally
recognized as revenue when the Company has provided substantially all the
initial franchise services. Inventory sales (and cost of sales) to the
franchisees are recognized when the inventory is shipped. Monthly franchise fees
are recorded when earned under the franchise agreements.
Lease Expense - The Company records lease expense in accordance with Statement
of Financial Accounting Standards (SFAS) No. 13 -- Accounting for Leases. As
such, rent expense on leases is recorded on a straight-line basis over the term
of the lease and the excess of expense over cash amounts paid are reflected as
"deferred rent" in the accompanying Consolidated Balance Sheets.
Store Opening Costs - Costs incurred in connection with start-up and promotion
of new store openings are expensed as incurred.
F-5
Income Taxes - The Company accounts for income taxes in accordance with SFAS No.
109 -- Accounting for Income Taxes. Under SFAS 109, the liability method is used
in accounting for income taxes. Deferred tax liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities and are measured using tax rates and laws that are expected to be in
effect when the differences are scheduled to reverse.
Earnings Per Share - During 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 128, "Earnings Per Share," (EPS) which requires
presentation of basic earnings per share and diluted earnings per share. The
weighted average shares used to calculate basic and diluted earnings per share
in accordance with SFAS No. 128 are as follows:
1998 1999 2000
----- ----- -----
Weighted average shares outstanding for basic EPS 6,791 6,801 6,136
- -----------------------------------------------------------------------------
Dilutive effect of common stock quivalents 185 91 113
- -----------------------------------------------------------------------------
Weighted average shares outstanding for diluted EPS 6,976 6,892 6,249
- -----------------------------------------------------------------------------
The Company uses the treasury method for calculating the dilutive effect of
stock options.
Impact of Recently Issued Accounting Pronouncements - In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In June 2000, SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
which amended SFAS No. 133, was issued. SFAS No. 133 and SFAS No. 138 establish
new accounting rules and disclosure requirements for most derivative instruments
and hedging activities. SFAS No. 133 and SFAS No. 138 require all derivatives to
be recognized as assets or liabilities at fair value. Fair value adjustments are
made either through earnings or equity, depending upon the exposure being hedged
and the effectiveness of the hedge. The Company currently does not utilize any
derivative instruments but may enter into such instruments in the future. SFAS
No. 133 and SFAS No. 138 are effective beginning on January 1, 2001.
2. INVENTORIES:
-----------
Inventories at January 29, 2000 and February 3, 2001, consist of the following
(in thousands):
Jan. 29, 2000 Feb. 3, 2001
------------- ------------
Finished goods $43,036 $46,588
Raw materials 3,351 3,861
- ------------------------------------------------------
Total $46,387 $50,449
- ------------------------------------------------------
3. PROPERTY, PLANT AND EQUIPMENT:
-----------------------------
Property, plant and equipment at January 29, 2000 and February 3, 2001, consists
of the following (in thousands):
Jan. 29, 2000 Feb. 3, 2001
------------- ------------
Land $ 475 $ 349
Buildings and improvements 10,923 9,693
Leasehold improvements 22,765 22,180
Equipment, furniture and fixtures 21,977 21,586
- ----------------------------------------------------------------------------
56,140 53,808
Less: Accumulated depreciation
and amortization (28,893) (28,176)
- ----------------------------------------------------------------------------
Property, plant and equipment, net $ 27,247 $ 25,632
4. ACCRUED EXPENSES:
----------------
Accrued expenses at January 29, 2000 and February 3, 2001, consist of the
following (in thousands):
Jan. 29, 2000 Feb. 3, 2001
------------- ------------
Accrued compensation
and benefits $ 4,266 $ 6,892
Accrued advertising 1,948 2,020
Gift certificate
payable 2,327 2,618
Other accrued expenses 6,032 4,738
- --------------------------------------------------------------
Total $14,573 $16,268
- --------------------------------------------------------------
Other accrued expenses consist primarily of liabilities related to interest,
sales taxes, property taxes, customer deposits, and percentage rent.
5. LONG-TERM DEBT:
--------------
Long-term debt at January 29, 2000 and February 3, 2001, consists of the
following (in thousands):
Jan. 29, Feb. 3,
2000 2001
-------- --------
Bank credit agreement-
Borrowings under
long-term revolving
loan agreement, including
term portion $ 7,166 $ 5,096
Notes related to lease-
hold improvements,
interest at 9.4%,
9.9% and 11.0%, respectively,
payable in monthly
installments through
February 1, 2003 547 346
Note related to
building improvements,
interest at 9.1% payable
in monthly installments
through
November 1, 2007 729 660
Notes related to POS equipment,
interest at 9.7% payable in
monthly installment through
November 1, 2004 924 767
- --------------------------------------------------------------
Total debt 9,366 6,869
Less: Current maturities 1,218 422
- --------------------------------------------------------------
Long-term debt $ 8,148 $ 6,447
- --------------------------------------------------------------
F-6
Bank Credit Agreement - The Company maintains a bank credit agreement (the
"Credit Agreement"), which provides for a revolving loan whose limit is
determined by a formula based on the Company's inventories, accounts receivable
and equipment values. In December, 2000, the Company extended the Credit
Agreement to April, 2004. The amended Credit Agreement changed the maximum
revolving amount under the facility to $50,000,000. The Credit Agreement also
includes a) financial covenants concerning minimum EBITDA, b) limitations on
capital expenditures and additional indebtedness and c) a restriction on the
payment of dividends. The covenants are in effect only if the Company's
availability in excess of outstanding borrowings is less than $10,000,000 and
the Company may not borrow additional funds if its availability in excess of
outstanding borrowings is less than $5,000,000. As of February 3, 2001, the
Company was in compliance with all loan covenants. Interest rates under the
amended agreement are prime or LIBOR plus 1.5%. The amended agreement also
includes provisions for a seasonal over-advance.
As of January 29, 2000 and February 3, 2001, the Company's availability in
excess of outstanding borrowings under the formula was $29,916,000 and
$33,079,000, respectively. Substantially all assets of the Company with the
exception of its distribution center are collateralized under the Credit
Agreement (see Note 14).
During the year ended January 29, 2000, borrowings under the Credit Agreement
bore interest ranging from prime to prime plus .75% or LIBOR plus 2.0% to LIBOR
plus 2.75%. During the year ended February 3, 2001, borrowings under the Credit
Agreement bore interest ranging from prime to prime plus .75% or LIBOR plus 1.5%
to LIBOR plus 2.75%.
The average daily outstanding balances under the Credit Agreement for the fiscal
years ended January 29, 2000 and February 3, 2001 were $9,856,000 and
$4,838,000, respectively. The highest month end outstanding balances under the
Credit Agreement for the fiscal years ended January 29, 2000 and February 3,
2001 were $17,957,000 and $8,613,000, respectively. In addition to borrowings
under the Credit Agreement, the Company has a letter of credit of $400,000 at
January 29, 2000 and February 3, 2001, to secure the payment of rent.
The aggregate maturities of the Company's long-term debt as of February 3, 2001,
are as follows: year ending 2002-$422,000; 2003-$442,000, 2004-$298,000, 2005
and thereafter-$611,000.
6. EXECUTIVE PAYOUTS AND OTHER ONE-TIME CHARGES:
---------------------------------------------
During the second quarter of fiscal 1999, the Company's Chairman/CEO retired and
the Company recorded a one-time charge of $2.2 million associated with that
event. The one-time charge includes a payout to the former Chairman/CEO of
approximately $1.8 million and professional fees, primarily recruiting and
related expenses, that were incurred in the second quarter of fiscal 1999.
During the fourth quarter of fiscal 1999, the Company recorded an additional
one-time charge of $.9 million. This charge included a $.4 million charge
related to the departure of the Company's former President, a $.2 million charge
related to discontinuing an unprofitable business and approximately $.3 million
of costs related to the recruiting and relocation of new corporate officers that
were incurred by the end of fiscal 1999.
7. COMMITMENTS AND CONTINGENCIES:
------------------------------
Litigation - Lawsuits and claims are filed from time to time against the Company
in its ordinary course of business. Management, after reviewing developments to
date with legal counsel, is of the opinion that the outcome of such matters will
not have a material adverse effect on the net assets of the Company or the
accompanying consolidated financial statements taken as a whole.
Employment Agreements - The Company has employment agreements with certain of
its executives expiring in 2001, aggregating base compensation of $2,712,000
(not including annual adjustments) over the term. These executives would also be
entitled to severance of approximately $2,235,000 (not including annual
adjustments) if terminated without cause or if the executive left the Company
for cause (as defined). The contracts also provide for additional incentive
payments subject to perform-performance standards. In addition, other employees
are eligible for incentive payments based on performance. The Company expensed
approximately $1,885,000, $250,000 and $2,530,000 in incentive payments in
fiscal years 1998, 1999 and 2000, respectively.
Lease Obligations - The Company has numerous noncancelable operating leases for
retail stores, certain office space and equipment. Certain facility leases
provide for annual base minimum rentals plus contingent rentals based on sales.
Renewal options are available under the majority of the leases.
Future minimum lease payments under noncancelable operating leases at
February 3, 2001, are as follows (in thousands):
Year Ending Amount
- ----------- ------
2002 $ 14,097
2003 13,472
2004 12,875
2005 10,533
2006 8,256
2007 and thereafter 22,855
- ----------------------------------------
Total $ 82,088
- ----------------------------------------
F-7
The minimum rentals above do not include additional payments for percentage
rent, insurance, property taxes and maintenance costs that may be due as
provided for in the leases. Many of the noncancelable operating leases include
scheduled rent increases.
Total rental expense for operating leases, including contingent rentals and net
of sublease payments received, approximated $12,839,000, $12,826,000 and
$13,319,000 for the years ended January 30, 1999, January 29, 2000 and February
3, 2001, respectively. Minimum rentals approximated $12,435,000, $12,383,000 and
$12,757,000, respectively. Contingent rentals, which are based on a percentage
of sales, approximated $423,000, $462,000 and $574,000, respectively.
Additionally, sublease payments received approximated $19,000, $19,000 and
$12,000, respectively.
Inventories - The Company ordinarily commits to purchases of inventory at least
one to two seasons in advance. The Company has committed to a substantial
portion of its purchases for fiscal 2001. In 2000, the Company purchased less
than 9% of its finished product from any single vendor.
Other - During fiscal 1997, the Company signed a five-year agreement which
expires in January, 2002 with David Leadbetter, a golf professional, to produce
golf and other apparel under his name. Payments are based on sales volumes. The
minimum annual commitment under this agreement is $150,000, which represents the
amount paid in each of the fiscal years 1998, 1999 and 2000.
8. BENEFIT PLANS:
--------------
Defined Benefit Pension & Post-Retirement Plans - In connection with the
termination of certain plans in 1994, the Company adopted a noncontributory
defined benefit pension plan and a post-retirement benefit plan to cover certain
union employees with equivalent benefits to the predecessor plans. The annual
contributions are not less than the minimum funding standards set forth in the
Employee Retirement Income Security Act of 1974, as amended. The plan provides
for eligible employees to receive benefits based principally on years of service
with the Company. The Company does not pre-fund the benefits from the post-
retirement benefit plan.
In accordance with SFAS No. 106, "Employers' Accounting for Post-Retirement
Benefits Other than Pensions", the Company records the expected cost of these
benefits as expense during the years that employees render service. The Company
has adopted the standards on a prospective basis as permitted. As such, the
Company amortizes the remaining related transition liability of $124,674 over 8
years.
The following table sets forth the plan's funded status as of December 31, 1999
and 2000, the date of the latest actuarial valuations (in thousands):
Pension Benefits Other Post-retirement Benefits
---------------------- ------------------------------
1999 2000 1999 2000
------ ------ ------ ------
Change in benefit obligation:
Benefit obligation at beginning of year $ 156 $ 206 $ 351 $ 338
Service cost 17 18 25 34
Interest cost 32 17 21 28
Actuarial (gain) loss 50 26 (59) 51
Benefits paid (49) (11) -- --
- ----------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $ 206 $ 256 $ 338 $ 451
- ----------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year $ 206 $ 471 $ -- $ --
Actual return on plan assets 205 3 -- --
Employer contribution 109 -- -- --
Benefits paid (49) (11) -- --
- ----------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 471 $ 463 $ -- $ --
- ----------------------------------------------------------------------------------------------------------
Funded status $ 265 $ 207 $ (338) $ (451)
Unrecognized net actuarial loss (gain) (42) 18 (137) (80)
Unrecognized initial net liability at transition 43 39 134 125
- ----------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 266 $ 264 $ (341) $ (406)
- ----------------------------------------------------------------------------------------------------------
Discount rate 7.25% 7.25% 7.25% 7.25%
Expected return on plan assets 8.00% 8.00% -- --
Components of net periodic benefit cost:
Service cost $ 17 $ 18 $ 25 $ 34
Interest cost 32 17 21 28
Amortization of net liability at transition 5 5 9 9
Expected return on plan assets (127) (38) -- --
Recognized net actuarial gain 66 -- (15) (6)
- ----------------------------------------------------------------------------------------------------------
Net periodic benefit cost $ (7) $ 2 $ 40 $ 65
- --------------------------------------------------------- ------------------------------------------------
F-8
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have less than a $13,000 effect on total
service and interest costs and post-retirement benefit obligation.
Profit Sharing Plan - The Company maintains a defined contribution 401(k) profit
sharing plan for its employees. All non-union and certain union employees are
eligible to participate after six months of service. Employee contributions to
the plan are limited based on applicable sections of the Internal Revenue Code.
The Company is required to match a portion of employee contributions to the plan
and may make additional contributions at the discretion of the directors of the
Company. Contributions by the Company to the plan were approximately $321,000,
$384,000 and $373,000 for the years ended January 30, 1999, January 29, 2000 and
February 3, 2001, respectively. The Company also established a non-qualified,
unfunded deferred Compensation plan effective October 1, 1998. This plan is
designed to provide a select group of management and highly-compensated
employees with retirement benefits. All assets of the plan are fully subject to
the Company's creditors. Contributions by the Company for the years ended
January 30, 1999, January 29, 2000 and February 3, 2001 were approximately
$10,000, $41,000 and $2,000, respectively.
9. INCOME TAXES:
-------------
As of the beginning of the fiscal year 1998, the Company had a deferred tax
asset related to tax net operating loss carry-forwards ("NOLs") and an
offsetting valuation allowance. Management determined, based on the Company's
recent history of earnings, that future earnings of the Company will more likely
than not be sufficient to utilize the NOLs prior to their expiration.
Accordingly, during the third quarter of fiscal 1998, the Company eliminated the
valuation reserve.
The provision for income taxes for continuing operations was comprised of the
following (in thousands):
Years Ended
---------------------------------
Jan. 30, Jan. 29, Feb. 3,
1999 2000 2001
-------- -------- -------
Federal:
Current $ 712 $ 53 $ 325
Deferred 651 641 2,312
State:
Current -- 115 149
Deferred 176 64 229
- ------------------------------------------------------------
Provision for
income taxes $ 1,539 $ 873 $ 3,015
- ------------------------------------------------------------
The differences between the recorded income tax provision and the "expected" tax
provision based on the statutory federal income tax rate is as follows (in
thousands):
Years Ended
---------------------------------
Jan. 30, Jan. 29, Feb. 3,
1999 2000 2001
-------- -------- -------
Computed federal tax
provision at
statutory rates $ 2,532 $ 761 $ 2,733
State income taxes, net
of federal income
tax effect 372 112 282
Valuation allowance (1,365) -- --
- ------------------------------------------------------------
Provision for
income taxes $ 1,539 $ 873 $ 3,015
- ------------------------------------------------------------
Temporary differences between the financial reporting carrying amounts and tax
basis of assets and liabilities give rise to deferred income taxes. Total
deferred tax assets and deferred tax liabilities stated by sources of the
differences between financial accounting and tax basis of the Company's assets
and liabilities which give rise to the deferred tax assets and deferred tax
liabilities are as follows (in thousands):
Jan. 29, Feb. 3,
2000 2001
-------- -------
Deferred Tax Assets:
Inventories $ 766 $ 723
Property, plant and equipment 536 786
Accrued liabilities and other 3,388 1,218
Operating loss carryforwards
and carrybacks 188 --
- -------------------------------------------------------
4,878 2,727
Deferred Tax Liabilities:
Prepaid expenses and other
current assets (700) (1,090)
- -------------------------------------------------------
Net Deferred Tax Asset $4,178 $1,637
- -------------------------------------------------------
10. INCENTIVE OPTION PLAN:
----------------------
Effective January 28, 1994, the Company adopted an Incentive Plan ("the 1994
Plan"). The 1994 Plan generally provides for the granting of stock, stock
options, stock appreciation rights, restricted shares or any combination of the
foregoing to the eligible participants, as defined. Approximately 893,000 shares
of Common Stock have been reserved for issuance under the Plan. The exercise
price of an option granted under the 1994 Plan may not be less than the fair
market value of the underlying shares of Common Stock on the date of grant and
employee options expire at the earlier of termination of employment or ten years
from the date of grant. All options covered under the 1994 Plan vest in full
upon a change of control of the Company.
On September 14, 1999, in order to attract a new Chief Executive Officer ("CEO")
to the Company, the Board of Directors authorized a pool of 600,000 shares of
Common Stock to be available to support a grant of options to said CEO ("the
1999 Plan"). An Option to purchase up to 600,000 shares of Common Stock under
the 1999 Plan was granted to the CEO pursuant to his Employment
F-9
Agreement, dated as of November 1, 1999. Unless sooner terminated pursuant to
those provisions of the Employment Agreement dealing with exercise of the option
after termination of employment or death, and subject to acceleration of vesting
as provided in the next sentence, the Option shall vest and become exercisable
in whole or in part from time to time as to (a) 200,000 of the Option Shares on
or after November 1, 1999, (b) an additional 200,000 of the Option Shares on or
after November 1, 2000 and (c) an additional 200,000 Option Shares on and after
the earlier of September 30, 2009 or the first date after which the average
closing price of the Common Shares for any consecutive 90-day period equals or
exceeds $8.00 per share. All options expire on November 1, 2009. Upon the
occurrence of a change in control of the Company (as defined in the Optionee's
Employment Agreement), any installments of the Option not then vested shall vest
and become immediately exercisable.
As of February 3, 2001, options outstanding for 505,025 shares had been granted
under the 1994 Plan at exercise prices ranging from $1.88 to $8.00 per share and
options for 447,480 shares were exercisable. As of February 3, 2001, options
outstanding for 600,000 shares had been granted under the 1999 Plan at an
exercise price of $3.41 per share, of which 400,000 shares were exercisable at
February 3, 2001. In addition, there are 95,959 options outstanding and
exercisable at $9.17 per share which were issued in fiscal 1993 under employment
agreements.
The Company has computed, for pro forma disclosure purposes, the value of all
compensatory options granted during fiscal year 1998, 1999 and 2000, using the
Black-Scholes option pricing model as prescribed by SFAS No 123. Assumptions
used for the pricing model include 4.5% to 7.9% for the risk-free interest rate,
expected stock option lives of 2-10 years, expected dividend yield of 0% each
year and expected volatility of 61.3% to 69.0%. Options were assumed to be
exercised upon vesting for the purposes of this valuation. Adjustments are made
for options forfeited prior to vesting. Had compensation costs for compensatory
options been determined consistent with SFAS No. 123, the Company's pro forma
net income would have been $5,680,455 in fiscal 1998, $432,160 in fiscal 1999
and $4,911,022, in fiscal 2000. Pro forma basic earnings per share would have
been $.84 in fiscal 1998, $.06 in fiscal 1999 and $.80 in fiscal 2000. Pro forma
diluted earnings per share would have been $.81 in fiscal 1998, $.06 in fiscal
1999 and $.79 in fiscal 2000.
Transactions with respect to the plans were as follows (shares in thousands):
January 30, 1999 January 29, 2000 February 3, 2001
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- --------- ------- --------- ------- ---------
Outstanding at
beginning of year 1,081 $ 6.45 1,093 $ 6.48 1,307 $ 4.75
Granted 36 $ 6.57 739 $ 3.51 14 $ 4.44
Exercised (1) $ 4.00 (38) $ 1.63 (22) $ 1.63
Canceled (23) $ 6.65 (487) $ 6.49 (98) $ 5.39
------ ------ ------
Outstanding at
end of year 1,093 $ 6.48 1,307 $ 4.75 1,201 $ 4.75
====== ====== ======
Exercisable at
end of year 637 $ 7.14 729 $ 5.31 943 $ 5.00
====== ====== ======
F-10
The following table summarizes information about stock options outstanding at February 3, 2001 (shares in thousands):
Options Outstanding Options Exercisable
- ----------------- ---------------------------------------------------- ---------------------------------
Number Weighted Average Weighted Number Weighted
Range of Exercise Outstanding Remaining Average Exercisable at Average
Prices Feb. 3 2001 Contractual Life Exercise Price Feb. 3, 2001 Exercise Price
- ----------------- ----------- ---------------- -------------- -------------- --------------
$1.88 - $4.00 806,125 8.29 $ 3.45 593,622 $ 3.45
$4.01 - $7.38 297,900 4.70 6.83 252,858 7.03
$7.39 - $9.17 96,959 2.99 9.16 96,959 9.16
The weighted average fair value of options granted for the years ended January 30, 1998, January 29, 2000 and February 3, 2001, was
$4.80, $5.06 and $3.83, respectively.
11. RIGHTS OFFERING:
----------------
In September, 1997, the Company adopted a Stockholder Rights Plan in which
preferred stock purchase rights were distributed as a dividend at the rate of
one Right for each share of Jos. A. Bank's outstanding Common Stock held as of
the close of business on September 30, 1997. Each Right will entitle
stockholders to buy one one-hundredth of a share of then newly designated Series
A Preferred Stock of Jos. A. Bank at an exercise price of $40. The Rights will
be exercisable only if a person or group acquires beneficial ownership of 20
percent or more of the Company's outstanding Common Stock (without the approval
of the board of directors) or commences a tender or exchange offer upon
consummation of which a person or group would beneficially own 20 percent or
more of the Company's outstanding Common Stock.
If any person becomes the beneficial owner of 20 percent or more of the
Company's outstanding common stock (without the approval of the board of
directors), or if a holder of 20 percent or more of the Company's Common Stock
engaged in certain self-dealing transactions or a merger transaction in which
the Company is the surviving corporation and its Common Stock remains
outstanding, then each Right not owned by such person or certain related parties
will entitle its holder to purchase, at the Right's then-current exercise price,
units of the Company's Series A Preferred Stock (or, in certain circumstances,
Common stock, cash, property or other securities of the Company) having a market
value equal to twice the then-current exercise price of the Rights. In addition,
if the Company is involved in a merger or other business combination transaction
with another person after which its Common Stock does not remain outstanding, or
sells 50 percent or more of its assets or earning power to another person, each
Right will entitle its holder to purchase, at the Right's then-current exercise
price, shares of common stock of such other person having a market value equal
to twice the then-current exercise price of the Rights.
The Company will generally be entitled to redeem the Rights at $.01 per Right at
any time until the tenth business day following the public announcement that a
person or group has acquired 20 percent or more of the Company's Common Stock.
12. DISCONTINUED OPERATIONS:
------------------------
In January, 1998 (fiscal 1997), the Company formalized a plan to dispose of its
manufacturing operations. Accordingly, the consolidated financial statements
reflect the disposition of the manufacturing operations as discontinued
operations. The revenues, costs and expenses, assets and liabilities, and cash
flows of the manufacturing operations have been excluded from the respective
captions in the Consolidated Balance Sheets and Consolidated Statements of Cash
Flows and the related footnotes included herein.
In April, 1998, the Company entered into an agreement which included the
disposition of the Company's manufacturing operations. Based upon the agreement,
an estimated loss on disposal of $2,479,000 was reported net of an income tax
benefit of $967,000, for an after-tax loss of $1,512,000 for fiscal 1997. In
addition losses from operations have been reflected for each year presented.
Summarized financial information for the discontinued operations is as follows
(in thousands):
Jan 30, Jan 29, Feb 3,
1999 2000 2001
------- ------- ------
Loss before income taxes $ (84) $ -- $ --
Net loss $ (51) $ -- $ --
- ------------------------------------------------------------------------
Current assets $ 1,159 $ 580 $ --
Less current liabilities $ 1,926 $ 834 --
- ------------------------------------------------------------------------
Net current liabilities $ (767) $ (254) $ --
- ------------------------------------------------------------------------
Noncurrent assets $ 241 $ -- $ --
Noncurrent liabilities $ 241 $ -- $ --
- ------------------------------------------------------------------------
Net noncurrent assets $ -- $ -- $ --
- ------------------------------------------------------------------------
Revenues of the manufacturing operations primarily represent intercompany sales
which have been eliminated in consolidation.
F-11
Net current and non-current assets/liabilities of discontinued operations noted
above include receivables, inventories, plant and equipment, pension termination
and other transaction costs associated with the discontinued manufacturing
operations.
13. REPURCHASE OF COMMON STOCK:
--------------------------
On April 12, 2000, the Company announced a repurchase of approximately 13% of
its outstanding common stock. In a private transaction, the Company purchased
896,400 shares at $3.50 per share.
14. SUBSEQUENT EVENT:
----------------
On March 27, 2001 the Company closed a $5,500,000 real estate loan with General
Electric Capital Business Asset Funding Corporation. The loan is amortized over
twelve years at 8.15% and is collateralized by the Company's corporate offices
and distribution center.
15. SEGMENT REPORTING (Unaudited):
-----------------
The Company has two reportable segments: full line stores and catalog and
Internet direct marketing. While each segment offers a similar mix of men's
clothing to the retail customer, the full line stores also provide alterations.
The accounting policies of the segments are the same as those described in the
summary of significant policies. The Company evaluates performance of the
segments based on "four wall" contribution which excludes any allocation of
"management company" costs, distribution center costs (except order fulfillment
costs which are allocated to catalog), interest and income taxes.
The Company's segment are strategic business units that offer similar products
to the retail customer by two distinctively different mentods. In full line
stores the typical customer travels to the store and purchases men's clothing
and/or alterations and takes their purchases with them. The catalog/direct
marketing customer receives a catalog in his or her home, office and/or visits
our web page via the Internet and either calls, mails, faxes or places an order
online. The merchandise is then shipped to the customer.
Segment data is presented in the following table (in thousands):
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal 2000 Full line Catalog & Internet direct
(in thousands) stores marketing Other Total
-------- ------------------------- --------- -----------
Net sales $173,762 $ 24,624 $ 7,866 (a) $206,252
Depreciation and amortization 3,145 25 1,025 4,195
Operating income (b) 28,806 1,845 (21,578) 9,073
Identifiable assets (c) 54,585 9,863 24,506 88,954
Capital expenditures (d) 2,192 935 568 3,695
Fiscal 1999 Full line Catalog & Internet direct
(in thousands) stores marketing Other Total
-------- ------------------------- --------- -----------
Net sales $161,285 $ 24,602 $ 7,642 (a) $193,529
Depreciation and amortization 3,123 15 835 3,973
Operating income (b) 24,362 2,377 (23,154)(e) 3,585
Identifiable assets (c) 51,307 8,862 24,582 84,751
Capital expenditures (d) 4,777 97 1,906 6,780
Fiscal 1998 Full line Catalog & Internet direct
(in thousands) stores marketing Other Total
-------- ------------------------- --------- -----------
Net sales $156,187 $ 23,783 $ 7,193 (a) $187,163
Depreciation and amortization 2,817 15 1,273 4,105
Operating income (b) 25,622 3,210 (19,622) 9,210
Identifiable assets (c) 47,562 9,192 25,761 82,515
Capital expenditures (d) 4,811 14 1,494 6,319
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Revenue from segments below the quantitative thresholds are attributable
primarily to four operating segments of the Company. Those seg- ments
include factory stores, outlet stores, franchise and regional tailor shops.
None of these segments has ever met any of the quantitative thresholds for
determining reportable segments.
(b) Operating income represents profit before allocations of overhead from
corporate office and the distribution center, interest and income taxes
which are included in other.
(c) Identifiable assets include cash, accounts receivable, inventories, prepaid
expenses and fixed assets residing in or related to the reportable segment.
Assets included in Other are primarily fixed assets associated with the
corporate office and distribution center, deferred tax assets,and inventory,
which has not been assigned to one of the reportable segments.
(d) Capital Expenditures include purchases of property, plant and equipment made
for the reportable segment.
(e) Includes one time charges of $3,102,000.
F-12
16. QUARTERLY FINANCIAL INFORMATION (Unaudited):
--------------------------------------------
- -------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
---------- --------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
FISCAL 2000
- -----------
Net sales $ 46,408 $ 44,869 $ 43,992 $ 70,983 $ 206,252
Gross profit 23,242 21,432 22,209 34,426 101,309
Operating income 2,065 1,253 938 4,817 9,073
Net Income 1,081 611 407 2,925 5,024
Net income per share (diluted) $ 0.16 $ 0.10 $ 0.07 $ 0.48 $ 0.80
FISCAL 1999
- -----------
Net sales $ 43,607 $ 44,203 $ 43,739 $ 61,980 $ 193,529
Gross profit 22,108 21,276 21,562 28,553 93,499
Operating income (loss) 1,102 (1,067) 23 3,527 3,585
Net Income (loss) 472 (801) (236) 1,931 1,366
Net income (loss) per share
(diluted) $ 0.07 $ (0.12) $ (0.03) $ 0.28 $ 0.20
- -------------------------------------------------------------------------------------------
F-13